ADMINISTRATIVE AUDIT CLAUSES & OTHER AUDIT CLAUSES

SETTLEMENT OF AUDIT
Ahsan Tarique
CONCEPT OF AUDIT & NEED FOR AUDITING
The word audit is derived from the Latin word audire which means
to hear. In past, whenever the owners of a business suspected fraud, they
appointed certain persons to check the accounts. Such persons sent for the
accountants and heard whatever they had to say connection with the
accounts. Auditing is defined as a systematic and independent examination of
data, statements, records, operations and performances of an enterprise for a
stated purpose.
GENERIC RISK & CRITICAL CONTROL FUNCTIONS
In many cases of audit: Internal, External,

fail to detect and control fraud,

errors, negligence, misappropriation Of fund, Loan Scams, etc . Audits fail to

control and prevent the embezzlement of huge fund. From the various analysis
and investigation it is evidenced that there are many lapses and weaknesses in
the internal control systems of banks which are not detected while conducting
audits by the auditors. .Banks are potentially exposed to some generic risk
such as Lending risk, Foreign exchange risk, and money laundering risks and
so on. Banks must ensure appropriate internal controls are in place. Prime
responsibility of audit is to review the quality and effectiveness of the controls
within the banks to manage and mitigate risk and protect the assets of the
bank.
ADMINISTRATIVE & BUSINESS, FINANCIAL AUDIT CLAUSES
It is not possible for audit to examine of all critical controls area, but
rather audit must examine and a number of GENERIC STANDARDS, whether
any fraud, deviation has occurred or not. Those GENERIC STANDARDS are
formulated by Bank governing authority. In 2010 BDBL has developed
Delegation of Power vide Administrative Circular 18/2010 dated-27-06-2010.

That Delegation of Power had four components. (a) Administrative, (b)

Business,

(c) Financial,

(d)

Commercial.

Although

Business

Power

&

Commercial Power have been changed or modified by Credit Polixcy-2014 but

Administrative & Financial Power are still same. Admin power includes
Appointment, Transfer, Leave ,Grant to tour, etc. The main responsibility of
auditors is to examine whether an employee is granted leave or tour by proper
authority or not. Furthermore, auditors will also examine leave register, TA/DA
Bill and whether administrative power is properly exercised or not.
-02Financial Power describes power relating to purchasing stationery
items, Dead stock articles, Legal bills, Repair & maintenance of Banks
property & rented property, salary & allowances, Lunch bill, Misc expenses,
etc. In Financial power it is specifically described which authority can pass
what type of expenditure bill and to what extent.
In Business Power Sanction Powers related to Industrial Loan &
Advances and Related Issues, Sanction Powers Related to Investment Banking
& Sanction Powers related Foreign Exchange Business. Auditors will audit
whether a particular loan/advance is sanctioned by proper authority as
delegated power in Credit Policy-2014 or not. There are number of related
issues in Loan & advances , such as- Approval of PCR, Approval of repayment
schedule as per terms Rephasement of loan, All kinds of changes in the terms
& conditions of

sanctioned/ approved. loan, Changes in the repayment

schedule, Taking of action against the defaulting borrowers, Renewal of

working capital & Cash Credit (CC) loan, etc. It may be mentioned here that
SME loan will be guided by its own policy and procedures circulated by SME
Deptt. from time to time and through SME Manual-2013.
SERVICE RULE & OTHER AUDIT CLAUSES

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-03But According to BDBL Service Rule-2011, Banks shall abide by the provisions
of The Bangladesh Shilpa Bank Employees Service Regulations, 1991 and The
Bangladesh

Shilpa Rin Sangstha Employees Service Regulations, 1988 .

Therefore, terms and conditions of service existing employees of BSB and

BSRS will follow their respective service rule.
TYPES OF AUDIT OBJECTIONS
Generally we face three types of audit in branch. Internal Audit, Bangladesh
Bank

Audit

&

Commercial

Audit.

Internal

Audit

mainly

focuses

on

irregularities in daily banking activities & administrative activities of branch.

Audit team from Head Office conducts Internal Auditing. Primary objection
areas of this type of auditing are given below Objections Related To Retail Banking and Cash
Whether vault limit exceeds or not

 Position of Cash limit

Irregularities in passing cheque/vouchers and voucher register
Unadjusted sundry deposit & Unadjusted Suspense/temporary advance
accounts
Petty Cash, Cash Limit, and security deposit
Irregularities in Account opening
Stop Payment Register

Objections Related to Administrative & Disciplinary issues

Attendance
Key Register
Lunch subsidy, Overtime
Maintenance of Bank Car & expenses
Control document
Irregularities Admin Expenses
Irregularities in Depreciation charges
Purchase & Inventory of Stationery article printing items
Branch security system & conditions of weapon
Objections Related to Loan & Advances issues
Irregularities in documentation
Whether any slack in supervision of project
Whether any irregularities in inspection of projects
Whether HO guidelines & circulars are strictly followed by branch or not
in sanction/disbursement
Follow-up of litigation projects
Achievement of targets fixed by HO

-04Bangladesh Bank Audit

Bangladesh Bank is empowered to regulate and supervise the banking
companies and financial institutions of the country

.The Department of

Banking Inspection-1,2,3,4 (DBI-1,2,3,4) are the four departments those are

entrusted with the responsibility of inspecting the performance of commercial
banks that are operating in the country with special emphasis on regulatory
and supervisory compliances.
Common Objections Related To BB Audit

 Whether Bank Company follow BB rules and regulation in banking

operation.
Whether any shortfall in maintaining provision
KYC , CTR,STR
Irregularities in Rephasement of loan
Irregularities in Foreign exchange business
Compliance and Implementation of Core Risk Management

Commercial Audit
Commercial Audit Directorate is empowered to conduct audit of all NCBs and financial
institutions.
Common Objections Related To Commercial Audit
Commercial audit team tries to investigate whether banking transactions do
not meet vat,tax and other govt revenue. This type of audit focuses on whether
related govt rules & regulations are followed in branch expenditure or not.